Health Savings Facts

Health Savings Accounts (HSAs) are the product of the Medicare Prescription Drug Improvement and Modernization act signed into law December 2003, by President Bush. HSAs are comparable to IRAs in that the contributions are deductible to the contributor (employer or Employee) and generate tax-free earnings. Employers or family members may make contributions to the HSAs on behalf of the qualified individual. Similar to the IRA, the HSA is individual owned and is completely portable if the employee changes jobs or leaves the workplace.

HSAs cannot stand alone. To be eligible for a HSA, an individual must be covered by a high deductible health plan (HDHP). Any individual is eligible to contribute to an HSA if they have a qualified health plan and are not covered under any other health plan (including Medicare). An HDHP is a plan with a $1,000 minimum deductible for an individual and $2,000 for a family. The maximum annual HSA contribution is the lesser of the HDHP deductible or an annually adjusted amount set by the IRS and Department of Treasury.

For the amount of distribution to be tax free it should be for qualified medical expenses. If the amount distributed is used for anything other than qualified medical expenses, the disbursement will be taxed and subject to penalty. Individuals 55 and older that are covered by an HDHP can make additional "catch up" contributions for medical expenses, which will not be covered by Medicare. Contributions must stop once the individual is eligble for Medicare.

HSA – Frequently Asked Questions

1. What is an HSA (Health Savings Account)?
   
   An HSA is an account established for the purpose of paying qualified medical expenses for individual families covered solely under a High Deductible Health Plan. Your HSA account is Funded with pre-tax dollars and can be withdrawn tax free, provided the funds are used for qualified medical expenses.
   
   
2. What are some examples of medical expenses that are allowedf?
   
   - Dental and optical care
   - Prescription drugs
   - Fertility treatments, birth control, well-baby care
   - Physical therapy
   - Chiropractors
   - Acupuncture
   - Long-term care insurance
   - Ambulatory services, artificial limbs and artificial teeth
   - Crutches
   
   Please be sure to check with your plan administrator, if you have questions, before you initiate a medical procedure to be sure that it is allowed.
   
   
3. Do health insurance premiums qualify as a medical expense?
   
   Health insurance premiuims are not a qualified medical expense, except for Long-Term health care, COBRA, or you have attained age 65 and are no longer able to contribute to your HSA. 
   
   
4.  Are there any penalties for misuse of HSA Funds?
   
   Yes, you are personally responsible for the correct use of your HSA funds. Misuse of HSA funds could result in IRS penalties and additional taxation.
   
   
5. Is the HSA Portable?
   
   Since the HSA is not tied to an insurance carrier, it is much more portable.
   
   
6. Are rollovers permitted from other Consumer Driven Healthcare Accounts?
   
   

   - Health Reimbursement Account (HRA)	No
   - Flexible Spending Account (FSA)	No
   - Archer Medical Savings Account (MSA)	Yes

   
   
7. How is the HSA debit card activated?
   
   To validate your Health Savings debit Master Card, sign it and perform any merchant or Point of Sale transaction.